Dukes v. Suncoast Credit Union (In Re Dukes)Dukes v. Suncoast Credit Union (In Re Dukes)
[PUBLISH]
Appeal from the United States District Court for the Middle District of Florida
(December 6, 2018)
Before JILL PRYOR and JULIE CARNES, Circuit Judges, and CONWAY,* District Judge.
Mildred M. Dukes (“Debtor“) filed for Chapter 13 bankruptcy in 2009, and the bankruptcy court confirmed her bankruptcy plan in 2010. At the time her plan was confirmed, Debtor had two outstanding mortgages with Suncoast Credit Union (“the Credit Union“). Debtor‘s plan did not address the Credit Union‘s mortgages aside from stating that Debtor would make payments directly to the Credit Union, not through the bankruptcy trustee. The plan did not specify repayment terms for the mortgages, did not set a schedule for repayments, and did not make any changes to the mortgages’ terms. When her plan was confirmed, Debtor was current on her payments to the Credit Union.
Debtor made the required payments under her bankruptcy plan, and, in 2012, Debtor made her last payment for her bankruptcy. Accordingly, the bankruptcy court discharged “all debts provided for by the plan.”
Debtor, however, had defaulted on her mortgage payments to the Credit Union in 2011. In 2013, the Credit Union foreclosed on Debtor‘s home under the second mortgage and sought a judgment against Debtor for the remainder on the first mortgage. In 2014, the Credit Union moved to reopen the bankruptcy proceeding and begin an adversary proceeding to declare that Debtor‘s personal liability on the first mortgage had not been discharged.
On appeal, Debtor contends that both the bankruptcy court and the district court erred in holding that the plan did not “provide for” the Credit Union‘s mortgage and that discharge was prohibited by
We affirm the bankruptcy court and district court and hold that Debtor‘s plan did not discharge the Credit Union‘s mortgage. In doing so, we hold that, for a debt to be “provided for” by a plan under
I. BACKGROUND
A. Factual Background
Debtor‘s first mortgage with the Credit Union was taken out in 1989 and her second mortgage was taken out in 2007. Together, the mortgages total roughly $150,000 and mature in 2022. On February 18, 2009, Debtor filed for Chapter 13 bankruptcy. In her bankruptcy schedules, Debtor listed the Credit Union—then Suncoast Schools Federal Credit Union—as the holder of both the first and second mortgаges on her primary residence. At the time Debtor filed for bankruptcy, she was current on her payments for both mortgages. During the bankruptcy proceeding, the Credit Union filed a proof of claim only for the second mortgage (with a balance of approximately $77,000), not the first.
Debtor‘s plan includes a number of sections potentially relevant to the Credit Union‘s mortgages. Specifically, the plan lists the amount for the adequate protection payments required under the Bankruptcy Code. See
First, the plan states that “All secured creditors, except as provided otherwise herein, including mortgage creditors, must be paid through the plan as part of the
(A) Pre-Confirmation Adequate Protection Payments: No later than 30 days after the date of the filing of this Plan or the Order for Relief, whichever is earlier, the Debtor(s) shall make the following adequate protection payments to creditors pursuant to
§1326(a)(1)(C) . . . . If Debtor(s) elects to make such adequate protection payments directly to the creditor, and such creditor is not otherwise paid through the Plan, such payments shall constitute adequate protection.
Following this and under the heading “Paid directly to the Creditor,” the plan includes the following entries:
| Creditor | Total Est. Claim | Direct Ad. Prot. Pay. |
|---|---|---|
| Suncoast Schools FCU | $79000.00 | $611.00 |
| Suncoast Schools FCU | $77671.00 | $1,040.00 |
Part (B) of the same section addresses “Claims Secured by Real Property Which Debtor(s) Intends to Retain / Mortgage Payments Paid Through the Plan.” The Credit Union‘s mortgages presumptively fit into this category. But, in the section where Debtor could have elected to have the Trustee “pay the post-petition mortgage payments” on Debtor‘s behalf, Debtor wrote “N/A.”
The plan concludes with a calculation of the total debt burden under the plan‘s payment schedule. This calculation includes a dividend of $3,600 to unsecured creditors, attorneys’ fees totaling $1,500, and a trustee‘s fee of $566.60, for a total of $5,666.66 to be paid off in thirty-six installments over an estimated three years.1 None of this money goes to pay off the roughly $150,000 Debtor owed on the Credit Union‘s mortgages.
When Debtor filed her Chapter 13 petition, an automatic stay went into effect that prevented any crеditor, including the Credit Union, from foreclosing on1
Debtor‘s property. See
The Credit Union did not object to the plan, and the bankruptcy court confirmed it in May 2010. Shortly thereafter, the court issued a follow-up order identifying the claims that would be allowed and ordering disbursement pursuant to the plan. The Credit Union‘s first mortgage was omitted from this order, as no proof of claim had been filed. The order listed the second mortgage (for which a proof of claim was propеrly filed) in “Exhibit D” as “hereby allowed,” but noted that “the Trustee shall not make distribution upon such claims” under the confirmed plan.
Thus, at each point in the bankruptcy proceeding, Debtor intended—and was granted the right—to make payments on
Once the plan was confirmed, Debtor began making payments to the trustee. She timely made her thirty-six payment obligations and, upon completion, the bankruptcy court discharged “all debts provided for by the plan” in March 2012, under
During this same time period, Debtor made a few of the scheduled payments to the Credit Union on her mortgages but stoрped paying altogether in 2011. Both mortgages entered default. In 2013, the Credit Union foreclosed on Debtor‘s home under the second mortgage and sought a personal judgment against Debtor on the first.
B. Procedural History
In 2014, the Credit Union moved to reopen the bankruptcy case and commenced an adversary proceeding seeking a determination that Debtor‘s personal liability on the first mortgage had not been discharged. Both parties moved for summary judgment. The bankruptcy court granted summary judgment to the Credit Union and concluded that the Credit Union‘s mortgage had not been discharged because it was not “provided for” by the plan, as it was paid outside the plan and unaffected by the plan itself. The bankruptcy court also held that, even if the mortgage was provided for, the antimodification provision in
II. STANDARD OF REVIEW
In a bankruptcy appeal, this Court functions as a second reviewer of the bankruptcy court‘s rulings and applies the same standards as the district court. Brown v. Gore (In re Brown), 742 F.3d 1309, 1315 (11th Cir. 2014). Conclusions of law are reviewed de novo, and findings of fact are reviewed for clear error. Id.
III. DISCUSSION
Debtor asserts that the bankruptcy court‘s discharge under
Debtor also argues that, regardless of whether the Credit Union‘s mortgage was provided for by the plan, it was discharged because the Credit Union failed to file a proof of claim for it. This argument was not raised before the bankruptcy court and therefore was not properly preserved for appeal. Even if considered,
A. Whether the Plan “Provided for” the Credit Union‘s Mortgage
Debtor asserts that the Credit Union‘s first mortgage was discharged because the plan “provided for” it by stating that it would be paid outside the plan. The Credit Union contends—and the bankruptcy court and district court agreed—that mere reference to the mortgage is insufficient for the plan to have “provided for” it, so the debt was not discharged. After careful review, we agree with the Credit Union, the district court, and the bankruptcy court.
1. Defining “provided for” in § 1328(a)
The bankruptcy court‘s discharge covered “all debts provided for by the plan.”
“When construing the language of a statute, we ‘begin [ ] where all such inquiries must begin: with the language of the statute itself,’ and we give effect to the plain terms of the statute.” Valone v. Waage (In re Valone), 784 F.3d 1398, 1402 (11th Cir. 2015) (alteration in original) (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989)). In doing so, “we read the statute to give full effеct to each of its provisions . . . [and] look to the entire statutory context.” Davidson v. Capital One Bank (USA), N.A., 797 F.3d 1309, 1315 (11th Cir. 2015) (alteration in original) (quoting United States v. DBB, Inc., 180 F.3d 1277, 1281 (11th Cir. 1999)).
In determining the meaning of “provided for” in
In Rake, the debtors filed for Chapter 13 bankruptcy while in default on their home mortgages, and their bankruptcy plans proposed to cure the defaults through repayment schedules that would be administered inside the plans. Id. at 466-67. Future payments of principal and interest on the mortgages, however, would be paid directly to the creditor. Id. The debtors argued that the arrearages (overdue debts) were not provided for by the plan and therefore did not have to comply with the requirements of
(citing American Heritage Dictionary 1053 (10th ed. 1981)). Applying this definition, the Court concluded that the bankruptcy plans “clearly ‘provided for’ respondent‘s home mortgage claims by establishing repayment schedules for the satisfaction of the arrearages portion of those claims.” Id. Importantly, the Court acknowledged that the plans split the debt into two separate claims: “the underlying debt and the arrearages.” Id. “While payments of principal and interest on the underlying debts were simply ‘maintained’ according to the terms of the mortgage documents during the pendency of petitioners’ cases, each plan treated the arrearages as a distinct claim to be paid off within the life of the plan pursuant to repayment schedules established by the plans.” Id. Hence the Court concluded that the arrearages were “provided for” by the plans and the creditor was entitled to interest under
Rake teaches two critical lessons that apply here. First, “provided for” by the plan means to “make a provision for” or “stipulate to” something in the plan. Id. Here, Debtor‘s plan neither made provisions for, nor stipulated to, anything regarding the Credit Union‘s mortgage. Unlike the plan in Rake, Debtor‘s plan did not set forth any repayment terms for any portion of the Credit Union‘s mortgage. Instead, the plan merely stated that the Credit Union‘s mortgage would be paid
outside the plan—nothing more.3 The
Second, Rake‘s distinction between the two claims for underlying debt and arrearages is instructive here. Under the Supreme Court‘s analysis, the arrearages on the mortgages were “‘provided for’ by the plan[s]” because they were to be “paid off within the life of the plans pursuant to repayment schedules established
by the plans.” Id. (emphasis added). By contrast, the underlying debts paid outside the plan “were simply ‘maintained’ according to the terms of the mortgage documents.” Id. Although the Court did not address whether the underlying debts were “provided for by the plan,” its analysis suggests that claims wholly governed by the original loan instruments—rather than the terms of the bankruptcy plan—are not “provided for by the plan” in the sense Chapter 13 contemplates.
Applying this here, we find that, by doing nothing more than mentioning that the Credit Union‘s mortgage would be paid outside the plan, the plan did not “prоvide for” the mortgage. The underlying debts paid outside the plan in Rake that were merely “maintained” are analogous to the Credit Union‘s mortgage here. And, again, the plan did not set a repayment schedule for the mortgage and did not establish any repayment terms. The plan simply stated that Debtor would make any payments directly to the Credit Union. The Credit Union‘s rights and Debtor‘s liability remained governed solely by the original loan documents. By neither stipulating to nor making provisions for the Credit Union‘s mortgage, the plan did not “provide for” it, and the mortgage was not included in the discharge under
In arguing otherwise, Debtor reads Rake far too broadly to support her position that mere reference to the mortgage is sufficient for the plan to “provide
for” it. Debtor relies on dicta from Rake that, “[a]s used in
2. Debtor‘s plan in the context of Chapter 13
Reviewing Debtor‘s plan in the context of Chapter 13 bankruptcy confirms that the Credit Union‘s mortgage was not “provided for” by the plan. Chapter 13 prohibits the modification of a secured claim unless the debtor either provides value to
Credit Union‘s mortgage in her plan. The simplest conclusion then is that Debtor‘s plan, by not addressing the Credit Union‘s mortgage, did not “provide for” it.
The goal of a Chapter 13 bankruptcy is to aggregate the debtor‘s outstanding debts, create a repayment plan for those debts, and prescribe the order, manner, and terms of repayment. The plan is proposed by the debtor, is subject to approval by certain classes of creditors, and must ultimately be confirmed by the bankruptcy court under a specific set of criteria. See
The Chapter 13 plan takes stock of the allowed claims of both secured and unsecured creditors, ranks creditors in order оf their priority, and creates a repayment plan to be administered by an assigned trustee. See
Generally, under these criteria, a Chapter 13 plan may “modify the rights of holders of secured claims” or simply leave them “unaffected,” thus allowing the terms of the original loan agreements to govern the debtor‘s obligations. See
three criteria: (1) the holder of a secured claim must accept the plan; (2) the plan must provide that the secured creditor will receive the full value of the secured claim and will not lose its security interest in the debtor‘s property until the claim is paid; or (3) the debtor must surrender the collateral. See
The antimodification provision in
provision under the
Also, some debts may mature after the three-to-five-year target date for the completion of all payments under the plan. The Code gives debtors a choice to either repay such long-term debt “inside” the plan—with the trustee acting as disbursing agent—or “outside” the plan, with payments coming directly from the debtor, often under the terms of the original debt instruments.
If the debtor elects to leave the rights of long-term lenders “unaffected” by the plan under
original maturity date and may not be extinguished until the debtor‘s obligations are fully met.6
Importantly, even a long-term debt incorporated into the plan under
In light of Debtor‘s successful efforts to structure her plan to permit direct payments to the Credit Union without any modificаtion of the repayment terms, the most obvious conclusion regarding the Credit Union‘s mortgage is that it was left unaltered by Debtor‘s bankruptcy. Because the plan did not propose any modification—likely because Debtor could not do so under
Debtor‘s contention is that, by mentioning that the Credit Union‘s mortgage will be paid directly, the mortgage was provided for by the plan and covered by the discharge—despite the fact that the plan never supplies any terms to govern the mortgage‘s repayment. Debtor‘s paradoxical position is that by saying essentially nothing about the mortgage‘s repayment, the plan still somehow “provided for” the mortgage and discharged it. In essence, Debtor‘s argument amounts to wanting something for nothing, aftеr Debtor expressly stated that she wanted nothing. Here, that result is plainly not allowed by the Bankruptcy Code.8
3. Other courts’ treatment of this issue
Although no binding authority has directly addressed the issue of what it means for a claim to be “provided for” by a plan under
The bankruptcy court in In re Hunt, No. 14-02212-5-DMW, 2015 WL 128048 (Bankr. E.D.N.C. Jan. 7, 2015), held the same. Based on analogous facts where the debtor‘s plan stated that the debtor would continue making mortgage payments directly to the lender, the court held that the mortgages were not entitled to be discharged. Id. at *4. The court observed that allowing the mortgages to be discharged would “provide[ ] relief to a debtor with no corresponding benefit to the creditor and may actually cause potential harm to the creditor.” Id. Further, “[g]ranting a discharge on long-term debts prior to the
Although the case did not directly address the meaning of “provided for” under
clarified to the Bankruptcy Court that she intended to keep current on her first mortgage payments, and she did not intend for those payments to be subject to the oversight of the Bankruptcy Court or otherwise governed by the Bankruptcy Code. The Plan‘s mere reference to the first mortgage as a claim that is not governed by the Plan does nоt, as Bank of America suggests, somehow accomplish the exact opposite of the language and make it a claim governed by the Plan for purposes of
§ 1322(b)(5) . In the same way that§ 1322(b)(5) does not apply to a claim that is not referenced on the face of a chapter 13 plan at all, it does not govern a claim listed on a chapter 13 plan only for the purposes of identifying it as a claim not subject to the plan.
Id. at 12 (emphasis in original). So, like here, the court concluded that the plan did not “provide for” the creditor‘s claim by merely mentioning that it would be paid outside the plan. Id.
Lawrence Tractor Company v. Gregory (In re Gregory), 705 F.2d 1118 (9th Cir. 1983), the only case aside from Rake relied upon by Debtor to support her expansive interpretation of “provided for,” is distinguishable. In that case, decided before Rake, the Ninth Circuit addressed a bankruptcy plan that “provide[d] for -0- payment to unsecured creditors requesting that said debts be discharged.” Id. at 1120. In оther words, the plan proposed to pay unsecured creditors nothing yet still discharge the debt. Id. at 1122. The court held that the plan “provided for” the unsecured creditor‘s debt and that it was accordingly discharged. Id. at 1123. In doing so, the court noted that “provided for” in
B. Whether Discharging the Credit Union‘s Mortgage Would Violate the Antimodification Provision in § 1322(b)(2)
Even if the plan were somehow construed as “provid[ing] for” the Credit Union‘s mortgage, there could still be no discharge of the mortgage given the antimodification provision in
As to the first argument—that the Credit Union consented to a modification that discharged the mortgage—although it is true that the Credit Union did not object, the Credit Union failed to object because the plan did not contain any modification that would be objectionable. “It is the debtor‘s obligation ... to specify as accurately as possible the amounts which it intends to pay the creditors.” Fawcett, 758 F.2d at 590. So Debtor must “pay the price if there is any ambiguity” in her plan‘s terms. Id. at 591. Debtor‘s plan merely stated that payments on the Credit Union‘s mortgage would be made directly to the Credit Union “rather than through the Chapter 13 Trustee.” Nothing about that representation indicated that the mortgage‘s repayment terms would be modified, that the 2022 maturity date would be shortened, or that the Credit Union would be paid less than the full value of its claims. Because there was nothing to object to, the Credit Union‘s silence does not imply that it consented to having its mortgage cut short and discharged in return for nothing.
Debtor‘s argument that discharge is not a modification is also unpersuasive. According to Debtor, upon discharge, the Credit Union could still foreclose on the property when and if the Debtor ceased making payments, but it could not seek a deficiency judgment
Finally, Debtor argues that because discharge is provided as a statutory remedy for completing a Chapter 13 plan, see
Indeed, in Nobelman, the Supreme Court refused “to give effect to [the] valuation and bifurcation of secured claims” provided to a Chapter 13 plan by
C. Whether the Credit Union‘s Failure to File a Proof of Claim Discharged the Mortgage
Regardless of whether the plan “provided for” the Credit Union‘s first mortgage, Debtor argues that the mortgage was discharged because the Credit Union failed to file a proof of claim for it. See
But, because Debtor raised this issue for the first time on appeal to the district court, she has waived it. “As a general rule,” an issue raised for the first time on appeal will not be considered. Blue Martini Kendall, LLC v. Miami Dade Cty., 816 F.3d 1343, 1349 (11th Cir. 2016). Debtor argues that this issue fits into an exception because the issue here is a “pure question of law,” but that exception also requires that our refusal to consider the issue result in a miscarriage of justice. See id. (quoting Dean Witter Reynolds, Inc. v. Fernandez, 741 F.2d 355, 360–61 (11th Cir. 1984)). Debtor voluntarily entered into the first mortgage knowing that she would eventually have to repay it. She also had the opportunity to raise this issue in the bankruptcy court, but simply failed to do so. So not considering the issue here does not result in a miscarriage of justice.
Even if we were to consider this, the merits favor the Credit Union. In Southtrust Bank of Alabama, N.A. v. Thomas (In re Thomas), we recognized that a secured creditor‘s lien survives even though the secured creditor failed to file a proof of claim. 883 F.2d 991, 997 (11th Cir. 1989). And we later acknowledged that, for secured creditors protected by the antimodification provision in
CONCLUSION
A long-term debt with a post-plan maturity date is not “provided for” by a Chapter 13 plan under
Accordingly, we AFFIRM.
JILL PRYOR, Circuit Judge, concurring in part and concurring in the judgment:
I concur in the judgment affirming the district court. I also join in Parts III.B and III.C. of the majority opinion. I do not join in Part III.A, however.
The majority opinion sets forth two alternative reasons for concluding that the bankruptcy court‘s discharge order did not discharge debtor Mildred Dukes‘s mortgage debt owed to creditor Suncoast Credit Union. In Part III.A. the majority explains that the debt was not “provided for by the plan” and thus not discharged.
Notes
508 U.S. at 329.the right to repayment of the principal in monthly installments over a fixed term at specified adjustable rates of interest, the right to retain the lien until the debt is paid off, the right to accelerate the loan upon default and to proceed against petitioners’ residence by foreclosure and public sale, and the right to bring an action to recover any deficiency remaining after foreclosure.
notwithstanding paragraph (2) of this subsection, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any . . . secured claim on which the last payment is due after the date on which the final payment under the plan is due.
(a) Subject to subsection (d), as soon as practicable after completion by the debtor of all paymеnts under the plan, . . . the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt—(1) provided for under section 1322(b)(5).